Duchesne v Master Education Services Pty Ltd

LEGISLATION CITED: Industrial Relations Act 1996

Deputy Commissioner of Taxation v Levick [1999] FCA 1580; (1999) 43 ATR 621 CASES CITED: Duchesne v Master Education Services Pty Ltd [2008] NSWIRComm 233 Re Minister for Immigration; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622

APPLICANTS Mr S J Burchett of Counsel Solicitors: Christopher Edwards, Solicitors & Accountants Mr R T B Wilson LEGAL REPRESENTATIVES: RESPONDENT Mr V V Bedrossian of Counsel Solicitors: Meehans Solicitors Mr P F Meehan

DENNIS LAURENCE DUCHESNE AND ANOTHER v MASTER EDUCATION SERVICES PTY LTD

Application under section 106 of the Industrial Relations Act 1996

1 On 4 December 2008, an interlocutory judgment was given in Duchesne v Master Education Services Pty Ltd [2008] NSWIRComm 233, in which an application by Mr Dennis Laurence Duchesne and Mrs Cheryl Karen Duchesne ("the applicants") to have proceedings adjourned pending their appeal to a Legal Aid Review Committee for legal aid, was dismissed. The Court found the appeal amounted to an abuse of the Court's process by the applicants' solicitors, as it was done to improperly hinder or improperly delay the conduct of proceedings before the Court. 2 A notice of motion filed by Master Education Services Pty Ltd ("the respondent") on 31 July 2008 to dismiss proceedings for want of prosecution was listed for hearing on 11 December 2008. During the course of the hearing on that day, it was agreed that the respondent's motion be stood over generally and that the substantive matter, which was an application for relief by the applicants under s 106 of the Industrial Relations Act 1996, proceed to hearing. Consequently, the respondent sought two orders. The first was that the applicants pay, on an indemnity basis, the costs of the respondent's notice of motion filed on 31 July 2008. The second was that the applicants' solicitors pay, on an indemnity basis, costs incurred in or in relation to proceedings on and from 21 April 2008, including the notice of motion. Counsel for the applicants, Mr Burchett, objected on the basis that the application in respect of the solicitors did not appear formally on the motion and that it created an immediate conflict of interest between the client and solicitors. The parties provided written submissions and were advised that a determination would be made on the papers. This judgment deals with the question of costs in respect of those issues. 3 These proceedings, the facts of which were set out in Duchesne v Master Education Services Pty Ltd at [3] - [16], have an extensive history and I do not propose to repeat the factual background except where necessary. Relevantly, however, as I have indicated, the Court made findings in the interlocutory judgment in relation to the conduct of the applicants' solicitors in filing an appeal to a Legal Aid Review Committee against a decision to refuse legal aid: [27] I am satisfied on the information before the Court that the intended effect of what was done was to delay the prospect of the Court acting on the outcome of the appeal, either by scheduling trial dates or entertaining the motion by the respondent to dismiss. Such conduct amounted to an abuse by the applicants' solicitors of the Court's process. [28] On this analysis, the appeal, or intention to appeal, was not bona fide because the appeal or intention to appeal was intended to improperly hinder or improperly delay the conduct of the proceedings. I so find. Accordingly, the applicants are not entitled to an adjournment pursuant to s 57 of the Legal Aid Commission Act. [29] The respondent's notice of motion to dismiss the proceedings for want of prosecution will be heard on Thursday, 11 December 2008 at 2.00 pm. 4 The application to dismiss for want of prosecution was ultimately not determined and the motion was stood over generally, with the respondent having liberty to apply to have the motion re-listed. It was also agreed that the substantive matter be allocated to a trial judge and that it proceed to hearing. 5 The costs order sought against the applicants was identified in the notice of motion as: An order that the Applicants pay the Respondents' costs of and incidental to this Notice of Motion on an indemnity basis, such costs to be payable forthwith.

6 The order sought against the applicants' solicitors was not included in the notice of motion, but was explained in the respondent's submissions as follows: The Respondent will, therefore, seek an order that the Applicants' solicitors, whether by direct payment or by the provision of an indemnity to the Applicants in respect of a costs order made against the Applicants, pay for the entirety (that is, by way of full indemnity ) of the Respondent's costs incurred in or relation to the proceedings, including those costs of and incidental to the Notice of Motion filed 31 July 2008, on and from 21 April 2008, such costs to be payable/assessable forthwith. Respondent's submissions

7 In respect of the costs order against the solicitors, the respondent sought to rely on Rule 209(1)(c) or (d) of the Industrial Relations Commission Rules 1996. Rule 209 provides: (1) Where costs are incurred improperly or without reasonable cause, or are wasted by undue delay or by any other misconduct or default, and it appears to the Commission that a barrister, solicitor or agent is responsible, the Commission may, after giving the barrister, solicitor or agent a reasonable opportunity to be heard: (a) disallow the costs as between the solicitor or agent and the solicitor's or the agent's client,

(b) disallow the costs as between the barrister and that barrister's instructing solicitor or as between the barrister and the client,

(c) direct the barrister, solicitor or agent to repay to the client costs which the client has been ordered to pay to any other party,

(d) direct the barrister, solicitor or agent to indemnify any party other than the client against costs payable by the party indemnified. (2) Without limiting the generality of subrule (1), a barrister, solicitor or agent is responsible for default for the purposes of that subrule where any proceedings cannot conveniently proceed, or fail or are adjourned without useful progress being made, because of the failure of the barrister, solicitor or agent: (a) to attend in person or by a proper representative,

(b) to file any document which ought to have been filed,

(c) to deliver any document which ought to have been delivered for the use of the Commission,

(d) to be prepared with any proper evidence or account, or

(e) otherwise to proceed. (3) The Commission may, before making an order under subrule (1), refer the matter to the Registrar for enquiry and report. (4) The Commission may order that notice of any proceedings or order under this Rule must be given to the client in such manner as may be specified in the order under this subrule. (5) The term solicitor in this Rule includes the solicitor's agent. 8 The respondent contended that in order to give full effect to any order made pursuant to r 209, which operated by way of an indemnity in respect of another party's own legal costs (sub-rule (d)) or by way of an order for repayment to the client (sub-rule (c)), it was necessary to first make a costs order against the applicants. It was submitted that a failure to make such an order would leave the respondent uncompensated in respect of conduct, which must be attributable, at least by agency principles, personally to the applicants. 9 Regarding the personal costs order, the respondent submitted that the conduct of the applicant's solicitors, from the period 21 April 2008 to date, whereby the solicitors engaged in an abuse of the Court's processes in a number of instances, independently and cumulatively warranted a personal liability costs order against the solicitors. The respondent provided detailed submissions outlining the conduct that warranted a personal costs order being made. However, given the decision I have ultimately reached in this judgment, it is not necessary to canvass these submissions.

10 Mr Burchett maintained that he acted for the applicants and not the applicants' solicitors, but submitted that no costs order should be made against either party. It was his submission that the order being sought by the respondent created an obvious conflict of interest between the applicants and the applicants' solicitors. To create a conflict of interest between solicitor and client, particularly in circumstances of impecuniosity of the clients and their obvious difficulty retaining representation, was, in Mr Burchett's submission, not desirable in the interests of justice. 11 Further, Mr Burchett noted that r 209, the source of power relied upon by the respondent in making their application for costs, required a solicitor to be afforded a reasonable opportunity to respond to a personal costs order. As the respondent's intention to seek a costs order on an indemnity basis against the applicant's solicitors was not indicated in the notice of motion filed on 31 July 2008, the solicitors were not on notice of the order sought against them. Due to the conflict of interest and the solicitor's entitlement to be given a reasonable opportunity to be heard, Mr Burchett submitted that any determination in relation to such an order should be postponed until after the substantive proceedings were concluded, with formal notice to be provided to the solicitors. Mr Burchett proceeded to make submissions as to why an indemnity costs order against the applicants' solicitors should not be made. Once again, given the decision I have ultimately reached it is not necessary for me to address those submissions in this judgment. In respect of the notice of motion and an indemnity costs order against the applicants, Mr Burchett submitted that as the notice of motion had not been determined, the Court could not embark on a hypothetical determination for the purposes of assessing costs: Re Minister for Immigration; Ex parte Lai Qin (1997) 186 CLR 622.

12 The question of whether to order costs in this matter involves the determination of several complex issues. Ultimately, however, I am satisfied that it is not appropriate to determine those issues at this stage of proceedings, and that costs should be reserved until after the conclusion of the substantive hearing. I make this order for the following reasons. 13 The respondent seeks costs against the applicants only in respect of the notice of motion filed on 21 July 2008. Whilst the respondent submitted that all the evidence had been heard and some submissions made in relation to the motion, the parties have not formally closed their evidentiary cases and completed their submissions, nor has a decision been handed down on the motion. By virtue of the short minutes of order agreed to by the parties, the motion, in fact, remains stood over generally, with the respondents having liberty to apply to have the matter re-listed.

14 I am satisfied that the motion should be treated as part heard. The applicants may have further evidence to adduce, or have further submissions to make. It is conceded, on the other hand, that they may not, but the relevant point is that the Court is not in a position, at this stage, to properly and fairly determine the matter. As the matter has not been heard to finality, a determination in respect to the question of costs would be premature. 15 It is open to the respondent to re-activate, as it were, the motion to dismiss proceedings. Given this situation, I do not think it appropriate to deal with the question of costs in respect of the motion given that there is the possibility that the motion may subsequently proceed. I am satisfied that the appropriate course is to reserve the question of costs in respect of the notice of motion until the conclusion of the substantive hearing. For the same reasons, I propose to reserve the question of costs of the notice of motion in respect of the applicants' solicitors until the conclusion of the substantive hearing.

16 Given my decision to reserve the question of costs in respect of the notice of motion until the conclusion of the substantive hearing, it seems appropriate to also reserve the question of costs regarding the solicitor's conduct from 21 April 2008. It is difficult to see how the Court could adequately and fairly consider the question of costs as its relates to the conduct of the applicants' solicitors from the period 21 April 2008 to date, without having regard to the notice of motion filed 31 July 2008. I also note two further points. 17 Mr Burchett is counsel retained for the applicants. He does not represent the interests of the applicants' solicitors. Further, as Mr Burchett submitted, the order sought against the applicants' solicitors created a conflict of interest between the solicitors and their clients: BURCHETT: There is a preliminary matter in relation to that application which I should raise now and that is this, formally it is not on the motion that there is any application for costs against the solicitors personally. There has not been any clarity as to the basis upon which the application is brought and in circumstances where the proceedings continue and indeed where the relationship between the applicants and their solicitors is an extremely important one for the applicants to prosecute--

BURCHETT: They have been carrying these applicants for a long time and I do not know if anybody else would. An application of this sort immediately creates a conflict of interest between client and solicitor and in my submission it should be dealt with at the end of the proceedings. 18 Any order whereby costs are sought against another party's solicitor personally has the potential to create a conflict of interest between that solicitor and the client. In defending a personal costs order solicitors will have regard to their own interests in addition to their clients. Having regard to the applicants' financial situation, that no pressing reason has been advanced by the respondent as to why its application should be dealt with now as opposed to later, and that the matter is ready to proceed to trial, I accept Mr Burchett's submission that the question of costs should be dealt with at the completion of the substantive of proceedings. The effect of any conflict of interest arising as a result of the order sought may be better considered at that stage rather than now. I, therefore, propose to order that the costs in relation to the conduct of applicants' solicitors from 21 April 2008 be reserved until the conclusion of the substantive hearing. 19 Finally, given the seriousness of making a personal costs order on an indemnity basis (Deputy Commissioner of Taxation v Levick (1999) 43 ATR 621 at 627 per Hill J) and the complexities associated with a conflict of interest issue, I accept the submission of Mr Burchett that the solicitors were entitled, under r 209 to have a reasonable opportunity to be heard. However, it cannot be said that they have not been afforded this opportunity. I acknowledge that the order sought by the respondent against the applicants' solicitors was not included in the notice of motion. Instead, it was sought through an application made from the bar table. However, the applicants were afforded the opportunity by the Court to file written submissions and when asked how long was required, Mr Burchett requested one week. Whilst I also accept that the matter was a complex issue and that there were time constraints, the applicants' solicitors had the opportunity to take steps if they required further time to respond to the application.

20 The Court makes the following orders: (1) Determination of the costs order sought by the respondent against the applicants in relation to the notice of motion filed 31 July 2008 shall be reserved until the conclusion of the substantive hearing.

(2) Determination of the costs order sought against the applicants' solicitors in relation to the period from 21 April 2008 to date, including the notice of motion filed 31 July 2008, shall be reserved until the conclusion of the substantive hearing.

(3) The costs of the hearings on 1 and 11 December 2008 shall be reserved until the conclusion of the substantive hearing.

(4) Liberty to the respondent to have the question of costs re-listed on 14 days' notice subject to formal notice having been given to the applicants' solicitors.

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